The economic problems
Duvvuri Subbarao explains why India’s growth has slumped to 5%. His main point is that growth has declined sharply because all growth drivers have petered out. Growth comes from private consumption, government consumption, investment and net exports:
- The investment driver petered out some years ago as many projects got delayed or canceled because it became clear that they were based on a high-growth scenario, which was simply unrealistic;
- Net exports used to contribute positively to growth, but they’re not doing so anymore. The global value chain model is eroding because of advances in machine learning, artificial intelligence and robotics. As a result, it will be difficult for India to replicate the China model of export-led growth;
- Over the last five years, the single growth driver has been consumption, both government and private. Government is unable to expand spending further because of fiscal constraints. Private consumption has slumped because credit is being choked and households have run down their savings.
India’s Economy: When Will the Elephant Dance?
By: Duvvuri Subbarao, former governor of the Reserve Bank of India – University of Pennsylvania
The social problems
Balasubramanian and al., in this paper, describe the evolution of income inequality in India over the past couple of decades. They find that there has been a rapid increase in the top performing states in terms of per capita income since 2011 but the increase in inequality in urban India seems to be much higher than in rural areas.
Inequality Dynamics amidst Rapid Growth: A Post Liberalization Indian Perspective
Authors: Sriram Balasubramanian, Rishabh Kumar, Prakash Loungani
From: IMF, California State University-San Bernardino
The political problems
Shashi Tharoor analyzes the political trends that have contributed to India’s current predicament. Five of them are:
- The deepening of democracy which enabled the former underclass to become a potent political force;
- The backlash against cultural globalization;
- A revolt against the political insider class;
- The liberalization of the statist Indian economy which empowered an increasingly wealthy business community;
- The majority of India’s population (65%) are under 35, and young Indians are impatient for change and progress, tired of the old politics.
What Happened to India?
By: Shashi Tharoor – Indian National Congress
